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Pushing the Limits on Reasonable Notice, an Ontario Court awards 30 Months’ Notice

Pushing the Limits on Reasonable Notice, an Ontario Court awards 30 Months’ Notice

While the general rule of thumb for the maximum reasonable notice that a court will award to a terminated employee hovered around 24 months. Regardless of the length of service or other factors, the line in the sand for maximum reasonable notice has slowly eroded over the past few years, particularly in Ontario Courts.  This upper limit has once again been pushed in Ontario in the case of Dawe v. Equitable Life Insurance Company, 2018, ONSC 3130, where the Ontario Superior Court of Justice awarded a terminated long term employee 30 months’ notice under the circumstances.

In this case, the plaintiff, Michael Dawe, was employed by the defendant, Equitable Life Insurance Company for a period of 37 years. At the time of his termination, the plaintiff was 62 years old, a Senior Vice President and was earning a base salary of $249,000 and a significant bonus which was as high as $379,585 in 2014.  The defendant admitted that the plaintiff was terminated without cause, so the central issue for determination was what reasonable notice the plaintiff was entitled on termination.

While not directly relevant to the case, the plaintiff felt that he was unfairly targeted by management in an investigation into expense claims and retained a lawyer, claiming workplace harassment.  The Board of Directors of the defendant rejected the allegations that the plaintiff was harassed at work but within months decided to terminate his employment on a without cause basis.

In its decision the court stated:

[24]           There can be no dispute, an employer owes a duty to the employee to act fairly and reasonably.  Even though the employment relationship is based on contract, the rights of employees have long been recognized due, in part, to the imbalance in the bargaining power between employers and employees.

[25]           In this regard, it is difficult to understand how management allowed such a minor dispute to escalate and result in termination.  The cost to Equitable Life is significant, in excess of $800,000.00 by its own admission [with regard to what reasonable notice should be].

The court went on to discuss that while the general principle in employment law is that 24 months’ notice is generally identified as the maximum notice period in most cases, it had been recognized by the Ontario Court of Appeal that “there is no absolute upper limit or ‘cap’ on what constitutes reasonable notice, generally only exceptional circumstances will support a base notice period in excess of 24 months.”

Relying on the Bardal factors as outlined in the often-cited employment law case, Bardal v. Globe and Mail Ltd., 1960 CanLII 294 (ON SC), [1960] O.W.N. 253 (H.C.J.) the court recognized that the plaintiff’s age of 62 and the fact that he had devoted his entire working life to this one employer was significant in determining reasonable notice.  Furthermore, as there were no similar reasonable employment opportunities available for someone of the plaintiff’s age, experience, and level of responsibility, his ability to seek and secure alternative employment was greatly limited.  To this extent, the court held that “when there is no comparable employment available, termination without cause is tantamount to forced retirement.”

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Based on these factors, the court held that a reasonable notice period for the plaintiff was 30 months.  Additionally, the plaintiff was entitled to be compensated for his non-discretionary annual bonus during the reasonable notice period.

This case is demonstrative of the shift in both what the courts will hold as reasonable notice in certain cases, particularly with long term employees approaching retirement age.  While there is no mandatory retirement age in any jurisdiction in Canada, the general trend is to retire from work later in life, well after the previous normal standard of age 65.  According to the court here, “whether it is exceptional circumstances or recognizing a change in society’s attitude regarding retirement, the particular circumstances of the employee must be considered” and if an employee had not yet considered retirement, their termination may be forced early retirement if no other suitable work is available.  This factor has to be considered by an employer in determining the reasonable notice period for a long-term older employee.  Furthermore, with the 24 month limit on reasonable notice clearly no longer applying, employers need to be cognizant that, although generally only in rare cases, reasonable notice can be pushed to higher and higher amounts when the circumstances are justified.

Scott Chambers is an Employment and Human Resources lawyer at Doak Shirreff Lawyers LLPScott can be reached at [email protected] or 250-979-2527.  You can also follow Scott on Twitter at @DSEmploymentLaw and on LinkedIn here.